Public Key Infrastructure (PKI) is a set of hardware, software, people, policies, and procedures needed to create, manage, distribute, use, store, and revoke digital certificates. In cryptography, a PKI is an arrangement that binds public keys with respective user identities by means of a certificate authority (CA). In a PKI arrangement, the user identity must be unique within each CA domain. The binding is established through the registration and issuance process, which, depending on the level of assurance the binding has, may be carried out by software at a CA, or under human supervision. The PKI role that assures this binding is called the Registration Authority (RA). For each user, the user identity, the public key, their binding, validity conditions and other attributes are made unforgeable in public key certificates issued by the CA.
Although useful in certain contexts, the Public Key Infrastructure (PKI) has an inherent liability shortcoming that prohibits widespread adoption of inter-financial institution interoperability, especially in connection with high monetary value transactions/payments. Although existing security frameworks may satisfy the requirements associated with small monetary value transactions/payments, wholesale banking requires a framework capable of meeting the security requirements associated with value-bearing transactions of US$500,000,000 and beyond.
Most conventional PKI-based systems are adapted to deploy certificates to computers as opposed to people. Some PKI systems have had success deploying SSL certificates onto web servers. Although SSL certificate technology allows for deployment to individual users, market penetration for personal certificates is limited due to a number of reasons. For example, in the cases where an end-user obtains a personal certificate, inter-organizational interoperability is severely restricted.
One primary reason for this restriction is a lack of a viable liability model which addresses security requirements established, among many various factors, by a financial institution's regulatory, contractual, and technical environments. It is well-established that financial institutions are subject to an array of regulatory, contractual, and business requirements to effectively identify individuals who engage in business with the financial institution. Banking operations are subject to a multitude of regulations, including technical audit requirements designed to protect the safety and soundness of the financial institution's electronic operations. Among these regulatory requirements are standards governing the processes to set up credentials for a financial institution's customers. In the United States, banking regulators generally publish regulatory guidelines which, in effect, establish technical and other requirements for regulated financial institutions, including processes governing systems for the electronic transmission of value bearing instructions.
If a registration authority contractually agrees to issue credentials used by other legal entities, then the registration authority typically seeks to limit its liability contractually. The economic reality of registration authorities servicing wholesale funds transfers is that most registration authorities could not or would not honor the levels of liability experienced for a faulty acceptance (e.g., transfers of hundreds of millions or billions of dollars), leaving the financial institution as the de facto liable party. In view of this potential liability, wholesale financial institutions typically opt to accept payment instructions for which it has absolute certainty of the identity and legitimacy of the individual transmitting the instructions. If a financial institution were to accept a credential issued by another party in an interoperable PKI model, the financial institution would need to trust absolutely the other party's connection between the credential and the referenced identity.
However, no financial institution or other registration authority could or would accept unlimited liability for all transactions/payments executed at a different financial institution. As an illustration, the top wire processor in terms of dollar volume is JPMorgan Chase Treasury Services, which processes more than $3 Trillion dollars in some single days. No third party financial institution or registration authority would be in a position to accept liability for JPMorgan's payment processes; conversely, JPMorgan would in turn not wish to accept liability for other financial institutions' payments.
Traditional PKI credentials, while interoperable in theory, alone are insufficient to overcome the following primary obstacles inherent to the use of interoperable credentials in high-value transactions:
1. Autonomy: If, for example, a bank (Second Bank) is contemplating recognizing credentials issued by another bank (First Bank), Second Bank would understandably want to audit First Bank's practices as a credential issuer against Second Bank's policies. Understandably, First Bank would be reluctant to agree to audits of its operations by competitors such as Second Bank.
2. Liability: Non-bank issuers of PKI credentials neither want, nor are in a position to accept, liability for failed high-value transactions. One way of addressing this problem is for a financial institution to issue its own credentials to limit risk and to recognize only the credentials it issues; however, this solution is not interoperable by definition.
3. Expense: If commercial financial institutions were to recognize non-bank certificate issuers for high-value commercial transactions, then commercial financial institutions would need to be connected to the non-financial institution certificate issuers. This is an added operational expense for financial institutions, creating a further barrier to achieving interoperability.
Authorizing online high-value commercial transactions requires a higher level of diligence when compared to consumer or retail transactions. A single high-value transaction may involve the transfer of hundreds of millions of dollars. The inherent risk associated with wholesale online banking compels many financial institutions to require additional security beyond authenticating users at login time. Additional security often takes the form of tighter controls and limits on the use of credentials. Ultimately, each financial institution trusts itself more than any other entity. This naturally leads to the practice of financial institutions issuing their own credentials.
Historically, a cash manager of a corporation would hold separate credentials from each financial institution with which he or she deals. While this satisfies the needs of commercial financial institutions, the corporation is forced to simultaneously hold accounts in multiple financial institutions, the insistence upon and proliferation of unique credentials is viewed by customers as poor service. Hence, it is increasingly important for global financial services providers to offer credentials that: (1) are interoperable to provide customer convenience, and (2) meet the needs of high-value commercial transactions in terms of authentication, authorization, and liability.
Therefore, there is a need in the art for an interoperable credential management system and method for online transactions, particularly high-value commercial transactions.